Everything you need to know about ‘rentvesting’

Are you looking to take your first step on the property ladder, but real estate prices are preventing you from buying a home in your dream location? Don’t worry, you’re not alone!

The property market is booming in Australia, with CoreLogic data from January 2017 showing a 10.7 per cent year-on-year increase in home values across the country’s capital cities.

This is great news for property owners, of course, but it may cause affordability problems for some first-time buyers who want to live in pricier suburbs. However, a new trend called ‘rentvesting’ is providing a solution for many prospective purchasers, particularly young people.

But what is rentvesting? And why is it becoming increasingly popular among millennials? Let’s delve a little deeper into this new property market trend.

The best of both worlds

Rentvesting is the term used to describe situations where individuals buy a property in a location that is more affordable for their budget, but rent out the dwelling instead of using it as their main residence.

Buyers then have the freedom to rent somewhere that better fits their lifestyle or career prospects, such as the CBD or other inner-city areas.

In other words, you can get the best of both worlds. You’ll be able to buy your first investment property at an affordable price, while still having the flexibility to live wherever you please.

Rentvesting often suits young people, as they typically don’t have large enough deposits to purchase homes in more expensive locations, and this approach gives them the opportunity to build wealth from an early age.

Property investment popular among millennials

Rentvesting could be a key factor in why younger generations are currently leading property demand in Australia.

Statistics from ING Direct show that 22 per cent of millennials (18-34-year-olds) claim to own at least one investment property. In comparison, 20 per cent of Generation X (35-49-year-olds) and 19 per cent of Baby Boomers (50-64-year-olds) said the same.

“Property is a great opportunity to build wealth, but it definitely pays to do your research,” said Mark Woolnough, head of third party distribution at ING Direct.

“Take your time, speak to the experts such as a mortgage broker or buyers’ agent, and focus on the financials of the investment rather than the emotions of a purchase.”

Does rentvesting sound like an opportunity you’d like to explore? Perhaps you’d just like to know more about how to get a home loan?